Bankruptcy (Scotland) Act 1985 (repealed)

36 Unfair preferences. S

(1) Subject to subsection (2) below, subsection (4) below applies to a transaction entered into by a debtor, whether before or after the coming into force of this section, which has the effect of creating a preference in favour of a creditor to the prejudice of the general body of creditors, being a preference created not earlier than 6 months before—

(a) the date of sequestration of the debtor’s estate (if, in the case of a natural person, a date within his lifetime); or

(b) the granting by him of a trust deed which has become a protected trust deed; or

(c) his death where, within 12 months after his death—

(i) his estate has been sequestrated, or

(ii) a judicial factor has been appointed under section 11A of the M1 Judicial Factors (Scotland) Act 1889 to administer his estate and his estate was absolutely insolvent at the date of death.

(2) Subsection (4) below shall not apply to any of the following transactions—

(a) a transaction in the ordinary course of trade or business;

(b) a payment in cash for a debt which when it was paid had become payable unless the transaction was collusive with the purpose of prejudicing the general body of creditors;

(c) a transaction whereby the parties thereto undertake reciprocal obligations (whether the performance by the parties of their respective obligations occurs at the same time or at different times) unless the transaction was collusive as aforesaid;

(d) the granting of a mandate by a debtor authorising an arrestee to pay over the arrested funds or part thereof to the arrester where—

(i) there has been a decree for payment or a warrant for summary diligence; and

(ii) the decree or warrant has been preceded by an arrestment on the dependence of the action or followed by an arrestment in execution.

(3) For the purposes of subsection (1) above, the day on which a preference was created shall be the day on which the preference became completely effectual.

(4) A transaction to which this subsection applies shall be challengeable by—

(a) any creditor who is a creditor by virtue of a debt incurred on or before the date of sequestration, the granting of the protected trust deed or the debtor’s death, as the case may be; or

(b) the permanent trustee, the trustee acting under the protected trust deed, or the judicial factor, as the case may be.

(5) On a challenge being brought under subsection (4) above, the court, if satisfied that the transaction challenged is a transaction to which this section applies, shall grant decree of reduction or for such restoration of property to the debtor’s estate or other redress as may be appropriate:

Provided that this subsection shall be without prejudice to any right or interest acquired in good faith and for value from or through the creditor in whose favour the preference was created.

(6) A permanent trustee, the trustee acting under a protected trust deed and a judicial factor appointed under section 11A of the M2 Judicial Factors (Scotland) Act 1889 shall have the same right as a creditor has under any rule of law to challenge a preference created by a debtor.

(7) The permanent trustee shall insert in the sederunt book a copy of any decree under this section affecting the sequestrated estate.

Modifications etc. (not altering text)

C1 S. 36restricted by Drug Trafficking Offences Act 1986 (c. 32, SIF 39:1), s. 16(6)(a)

C2 S. 36 excluded (prosp.) by Companies Act 1989 (c. 40, SIF 27), ss. 154, 155, 165(2)(a), 215

C3 S. 36 restricted (prosp.) by Companies Act 1989 (c. 40, SIF 27), ss. 182(4), 215, Sch. 22 para. 8(2)(a)

C4 S. 36 restricted by Criminal Justice Act 1988 (c. 33, SIF 39:1), ss. 85(6)(a), 123, Sch. 8 para. 16

C5 S. 36 amended by Criminal Justice Act 1988 (c. 33, SIF 39:1), ss. 85(6)(b), 123, Sch. 8 para. 16

Marginal Citations

M1 1889 c. 39.

M2 1889 c. 39.